During the April 24 broadcast of his nationally syndicated radio show The Radio Factor, Fox News host Bill O'Reilly falsely claimed that both the “state and federal” government are “making more money now that the gasoline prices are higher because their tax goes up.” In fact, for the federal government and more than three-fourths of the states, taxes on gasoline remain constant regardless of gas prices because they are measured in cents per gallon (cpg), not as a percentage of total gas sales or wholesale prices.
Currently, the federal tax on gasoline is set at 18.4 cpg, and the federal tax on diesel fuel is set at 24.4 cpg. According to the American Petroleum Institute (API), which compiles gas taxes levied in all 50 states, 38 states have no percentage-based gasoline tax, opting instead for set taxes automatically factored into the retail price of gas. So, for the federal government and the majority of states, gasoline-tax revenue will remain constant, regardless of the retail price of gasoline.
Twelve states do impose various percentage-based taxes on gasoline, such as sales taxes, wholesale taxes, and gross-receipt taxes, but for many of those states, the tax rate is based on prices from the previous year. For instance, according to API, North Carolina's gas tax currently “consists of a 17.5 cpg flat rate” plus a “variable rate” that is 7 percent of the average wholesale price of gasoline over the preceding six months, a rate that is adjusted every six months. Between April 1, 2005, and September 30, 2005, the average wholesale price was $1.7755 per gallon, thus adding 12.4 cpg to the price at the pump. Other states, like Connecticut, impose a percentage-based gasoline tax at the wholesale level, which is not necessarily factored into gasoline taxes added at the pump. Six states -- California, Georgia, Hawaii, Illinois, Indiana, and Michigan -- charge a percentage-based sales tax on gasoline. Local municipalities also can collect gasoline taxes, and those rates vary widely across the country.
From the April 24 broadcast of Westwood One's The Radio Factor:
O'REILLY: Now there is a legitimate argument about the government, both state and federal, taxing gasoline, which they do all over the place. So, of course, they're making more money, the government's making more money now that the uh, gasoline prices are higher, because their tax goes up. Percentage of money they get goes up. So maybe that's factoring into it. I don't know. But I do know this: the oil companies did not have to raise this price this high. They did it because, as Bill Clinton once said, they could. Right back.
